An amortization schedule is the month-by-month breakdown of every mortgage payment into its principal and interest components. Understanding this schedule reveals why the first years of a mortgage feel like you are paying mostly interest, and how even small extra payments can save tens of thousands of dollars.
Step 1: The Payment Formula
M = P × [r(1+r)^n] / [(1+r)^n − 1] P = loan amount, r = monthly interest rate (annual/12), n = total payments (years × 12).
For a $300,000 loan at 6.5% for 30 years: r = 0.065/12 = 0.005417, n = 360. M = $1,896/month (principal and interest only).
Step 2: How Payments Split Over Time
| Payment # | Total Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,896 | $1,625 | $271 | $299,729 |
| 60 (yr 5) | $1,896 | $1,539 | $357 | $279,163 |
| 180 (yr 15) | $1,896 | $1,193 | $703 | $217,759 |
| 300 (yr 25) | $1,896 | $544 | $1,352 | $98,977 |
| 360 (yr 30) | $1,896 | $10 | $1,886 | $0 |
In payment #1, 86% goes to interest. By payment #300, only 29% is interest. The crossover point where principal exceeds interest occurs around year 19 for a 30-year loan at 6.5%.
Step 3: The Power of Extra Payments
Adding just $100/month to the payment above saves approximately $46,000 in total interest and pays off the loan 4.5 years early. Adding $200/month saves $76,000 and cuts 7.5 years. Extra payments go entirely to principal because you have already covered the monthly interest charge. View the full impact with the Amortization Schedule Calculator.
View your full amortization schedule with extra payment scenarios
Try the Amortization Calculator →Key Takeaways
- Early payments are mostly interest — principal builds slowly in the first half of the loan.
- Extra payments go entirely to principal, accelerating equity buildup and reducing total interest.
- $100/month extra on a $300,000 loan at 6.5% saves ~$46,000 in interest.
- Bi-weekly payments (26 half-payments = 13 monthly equivalents) add one extra payment per year.